Employees to Vote on Airline Concessions

DAVID KOENIG

Published 7:00 pm, Thursday, April 17, 2003

AP Business Writer

Enraged by an American Airlines plan to give bonuses to top executives, the flight attendants' union said late Friday it would scrap results of a vote that approved concessions the company says it needs to stay out of bankruptcy.

The union said it plans to schedule a new vote.

The company said Friday that executives had decided not to accept the bonuses, which were disclosed after employees voted to accept $10 billion in concessions over six years.

Still, the president of the flight attendants' union said the results of the voting were tainted because the company didn't tell workers about the bonuses until most of them had cast their ballots.

The union's move threatened to push American closer to bankruptcy just two days after members of its three main unions narrowly approved the concessions, which included wage cuts.

The company had said it would file for bankruptcy if the unions failed to approve the concessions.

After learning of the plan for a new round of voting by the Association of Professional Flight Attendants, American said it stood by the results of the earlier vote.

"American Airlines has a valid, ratified agreement with the APFA," said a company spokesman, Bruce Hicks. He said the company would not comment further.

Leaders of unions representing pilots and ground workers also complained about the bonuses, along with the company's decision to partially fund supplementary pensions for 45 top executives that would be protected even if American files for bankruptcy.

The unions argued that those moves are inappropriate at a time when the airline was asking employees to ratify pay cuts of 15.6 percent to 23 percent.

American said it would not rescind the added pensions, which the company said were necessary to keep senior executives.

American disclosed the bonuses and extra pension benefits late Tuesday in a securities filing. They caused an uproar when employees learned of them Thursday.

On Friday, chairman and chief executive Donald J. Carty apologized for not telling unions about the bonuses sooner and asked for their continued cooperation in helping the airline recover from a severe industrywide slump.

"Those executives who have made the personal commitment to remain with American during this financial crisis, myself included, are not here solely for monetary reasons and we have all agreed to give up these retention payments in order to give our employees confidence in management's ongoing commitment to shared sacrifice," Carty said in a written statement.

John Ward, president of the flight attendants' union, said Carty's late apology wasn't good enough.

"They had an obligation to provide us with the most reliable, up-to-date information available about the company" before employees voted, he said. "That obviously wasn't the case. The vote is so tainted that we are proceeding with a re-vote."

Ward said the new election would begin as quickly as possible. The last one, conducted by phone and the Internet, lasted two weeks. The concessionary pay cuts are scheduled to begin May 1.

In the earlier vote, flight attendants originally defeated their share of concessions _ $340 million a year. But the company agreed to delay a bankruptcy filing and gave attendants an extra day to vote or to change their vote.

The union and the company said the extension was needed because some workers had technical difficulties voting the first time.

With the extra day of voting, flight attendants narrowly approved the concessions.

The bonuses offered to Carty and five other senior executives were equal to twice their salaries. A seventh official was offered a bonus equal to his salary.

The flap over executive perks has delivered a damaging blow to the already poor management-labor relations at the airline, which has been hit by strikes and a pilot sickout.

"Labor-management relations have been acrimonious ever since I started working here," said Jay Narey, a 16-year flight attendant, "but this is beyond anything I imagined. This has taken the distrust to a new level."

Analysts said American's managers showed poor judgment in approving executive perks while the airline industry slumped, shareholders were losing money and employees were asked to take big pay cuts.

"It was handled poorly from a PR point of view," said Ray Neidl, an analyst with Blaylock & Partners. He predicted, however, that labor and management will put the incident behind them.

"They basically blackmailed their workers with threats of bankruptcy," said Lance Compa, a Cornell University labor law professor. "It puts a moral onus on management to share the pain."

Much of the employees' anger was aimed at Carty.

"We gave him a new lease on life," Ward said. "We've given him a big opportunity to turn things around because they said they needed $1.8 billion in (annual) employee concessions to make this thing work."

"I will be the first one calling for his resignation if this thing tanks, if the company goes into bankruptcy," Ward said.

Carty became CEO in 1998, succeeding Robert Crandall, who was an industry innovator but often clashed with labor. Flight attendants went on strike in 1993, and pilots went to the brink of a walkout in 1997.

Carty angered employees with the acquisitions of Reno Air and Trans World Airlines, which they viewed as unwanted competition from lower-paid workers at other carriers.

Pilots protested the Reno deal with a 1999 sickout that caused cancelation of 6,000 flights. The TWA deal made American larger than rival United, but it has laid off thousands of former TWA workers and mothballed many TWA planes.